Who is spending on FMCG's products

Apropos the edit “They are spending” (May 3), your conclusion that consumer sentiment seems to contradict any sense that the India story is stuttering despite the gloom about macroeconomic fundamentals is inconclusive and wrong. The improved performance of the fast-moving consumer goods (FMCG) sector only indicates that the class of people who can afford to buy FMCG products has been on the rise thanks to the widening income gap and increasing purchasing power. This only proves that the demand for such goods is inelastic and that there are people who can afford these goods and much more irrespective of price rise. This does not in any way reflect the economy’s performance in terms of price rise, productivity, employment, poverty levels, infrastructural development, GDP growth, exports, imports and so on. The government’s economic policies help only the rich and the middle class and this has been validated by the better performance of FMCG products. The general theory that increase in commodity prices will reduce demand does not hold true for goods produced by FMCG companies and automobile industries in India since the demand for such goods has always been inelastic thanks to wrong taxation policies and black money.

Dr.T.V.Gopalakrishnan
(This letter appeared in Business Standard dated 4/05/12).